(Investing) – NEW YORK -Oil prices fell about 2% to a 12-week low on reports OPEC+ will proceed with a planned oil output increase in April and on worries what U.S. tariffs would do to global economic growth and oil demand.
The Organization of the Petroleum Exporting Countries and its allies like Russia, known as OPEC+, has decided to proceed with a planned April oil output increase, three sources from the producer group told Reuters on Monday.
OPEC+ has been cutting output by 5.85 million barrels per day (bpd), equal to about 5.7% of global supply, agreed in a series of steps since 2022 to support the market.
Brent futures were down $1.48, or 2.0%, to $71.33 a barrel by 1:35 p.m. EST (1835 GMT), while U.S. West Texas Intermediate (WTI) crude fell $1.65, or 2.45%, to $68.11.
That puts both crude benchmarks on track for their lowest closes since December 6.
In other U.S. energy markets, the start of the April contract as the new front-month pushed U.S. diesel futures down to a nine-week low toward the end of winter heating season. Gasoline futures soared to a six-month high ahead of summer driving season.
U.S. President Donald Trump will decide on Monday what levels of tariffs he will impose early on Tuesday on Canada and Mexico amid last-minute negotiations over border security and efforts to halt the inflow of fentanyl opioids.
Trump has vowed to impose 25% tariffs on all imports from Canada and Mexico, with 10% on Canadian energy products.
“Tariffs might dent economic and oil demand growth, but they also curtail oil supply when directed towards oil producers, such as Canada and Mexico,” said Tamas Varga, an analyst at PVM.
Canada’s oilfield drilling and services sector was showing signs of slowing ahead of threatened tariffs.
Mexico’s President Claudia Sheinbaum said her country was ready for whatever decision Washington reached.
China, the second-biggest economy after the U.S., said it was preparing countermeasures to tariffs targeting U.S. agriculture.
In early trading, crude prices drew support from data showing manufacturing activity in February expanded at the fastest pace in three months.
Manufacturing in the U.S., meanwhile, was steady in February, but a measure of prices at the factory gate jumped to nearly a three-year high and it took longer for materials to be delivered, suggesting that tariffs on imports could soon undercut production.
Analysts have said Trump’s planned tariffs have also raised inflation worries at the U.S. Federal Reserve. This could lead the Fed to keep interest rates higher for longer, which could slow economic growth and energy demand.
Worries about the impact of possible slowing economic growth on oil demand pressured WTI prices, which have fallen about 10% over the past six weeks.
That prompted speculators last week to cut their net long futures and options positions on the New York Mercantile Exchange and Intercontinental Exchange (NYSE:ICE) to their lowest level since a record low of 30,623 contracts in December 2023, according to the U.S. Commodity Futures Trading Commission’s Commitments of Traders report.
In other news, Britain said several proposals had been made for a truce in fighting between Ukraine and Russia, after France floated a plan for a one-month pause leading to peace talks.
